BP, Gazprom Discuss Intl LNG Joint Venture

MOSCOW Mar. 01, 2007 (Dow Jones Newswires)

Top executives of U.K. oil major BP PLC (BP) and Russian gas monopoly OAO Gazprom (GSPBEX.RS) met Thursday to discuss the creation of a joint venture, Gazprom said, against the backdrop of heightened tensions between the two companies over BP's future in Russia.

Chief executive of BP PLC (BP), Lord Browne, and his successor-designate, Tony Hayward, discussed with Gazprom Chief Executive Alexei Miller the formation of an international joint venture for liquefied natural gas, Gazprom said, without giving more details.

A person familiar with the situation told Dow Jones Newswires that Browne and Hayward were also scheduled to meet with Gazprom Chairman Dmitry Medvedev later Thursday.

Medvedev, Russia's First Deputy Prime Minister, is widely seen as a leading contender in presidential elections scheduled for spring 2008. He meets with foreign energy executives less often than does Miller.

The executives discussed the possibility of establishing a joint venture for the development of the international business of the companies, including liquified natural gas, Gazprom's statement said.

Gazprom doesn't produce any LNG of its own, although the company aims to become a major player in the global LNG market during the next several years.

Gazprom is the world's biggest producer of natural gas, pumping out about 550 billion cubic meters of gas a year and supplying a quarter of Europe's total gas consumption.

In recent months Gazprom has placed limits on the development of BP's Russian joint venture, TNK-BP Holdings (TNBP.RS), through its monopoly control over Russia's gas transit network.

TNK-BP is pushing hard to reach agreement with Gazprom on developing its massive Kovykta gas field in Siberia. TNK-BP has offered Gazprom majority control over a new consortium that would develop the field, but Gazprom has yet to show interest in the offer in public.

TNK-BP risks losing its license for Kovykta as Russian regulators have accused the company of under-development of the field - though the company has been unable to export Kovykta gas for lack of Gazprom's approval.

Gazprom has also decided to limit the amount of gas TNK-BP unit Rospan International can ship through Gazprom's gas network to only 1.7 billion cubic meters in 2007, down from more than 3 bcm of gas in 2006.

TNK-BP is half-owned by BP and half-owned by a consortium of Russian investors.

Hayward, who serves on the board of directors of TNK-BP, will become chief executive of BP Aug. 1.

Copyright (c) 2007 Dow Jones & Company, Inc.


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